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The thesis is organized as follows. Chapter 2 contains a survey of the three most in‡fluential models on fi…rm heterogeneity and of the most important empirical work on firrm heterogeneity. The chapter starts with a brief review of the homogeneous productivity imperfect competition literature. Chapter 2 …finishes with a comparison of the three most in‡fluential models of fi…rm heterogeneity and the oligopoly model put forward in the thesis. Chapter 3 addresses exporting uncertainty under heterogeneous popularity. Chapter 4 contains the chapter on …firm heterogeneity under oligopoly. Chapter 5 constitutes the models on …firm heterogeneity and endogenous quality. Chapter 6 points out the within-sector specialization model. Chapter 7 addresses the effect of importer characteristics on unit values and the role of markups and quality to explain this effect. Chapter 8 concludes.
We estimate a structural model of heterogeneous multiproduct firms to examine the sources of firm heterogeneity emphasized in the recent trade and macro literatures. Using Nielsen barcode data on prices and sales, we estimate elasticities of substitution within and between firms, and use the estimated model to recover unobserved qualities, marginal costs and markups. We find that variation in firm quality and product scope explains at least four fifths of the variation in firm sales. Most firms are well approximated by the monopolistic competition benchmark of constant markups, but the largest firms that account for most of aggregate sales depart substantially from this benchmark. Although the output of multiproduct firms is differentiated, cannibalization is quantitatively important for the largest firms. This imperfect substitutability of products within firms, and the fact that larger firms supply more products than smaller firms, implies that standard productivity measures are not independent of demand system assumptions and probably dramatically understate the relative productivity of the largest firms.
This paper derives optimal trade and domestic taxes for a small open economy containing a monopolistically competitive (MC) sector in which firms may have heterogeneous productivity levels. Domestic protection brings gains from expanding the number of product varieties on offer, but these gains (and the corresponding rates of domestic subsidy or of import tariffs) are reduced by heterogeneity of foreign exporters who may withdraw from the market. Our analysis encompasses special cases in which the domestic MC sector can expand or contract flexibly, or is of fixed size. In the latter case gains from protection arise from terms of trade effects and, since various margins of substitution are switched off, only the relative values of domestic taxes, import tariffs and export taxes matter
Master's Thesis from the year 2015 in the subject Economics - International Economic Relations, grade: 2,0, University of Münster (Institute of International Economics), language: English, abstract: While the traditional Trade Theory is merely able to explain trade between developed and less developed countries, the more recent literature of the New Trade Theory allows for capturing trade between countries that are all highly developed. One of its models - the Melitz model of intra-industry trade (2003) - incorporates heterogeneity in firm productivity into a framework based on Krugman (1980). The Melitz model is a corner stone of New Trade Theory models and has been extended in various papers to analyze intra-industry trade with respect to different aspects. One important aspect that is covered intensively in recent literature is the efect of unilateral trade liberalization on a country's welfare. This thesis presents the Melitz model (2003) by firstly illustrating its fundament based onKrugman (1980) and secondly deriving its working mechanisms both for opening for trade as well as for trade liberalization. Further, extensions by Melitz and Ottaviano (2005) and Demidova and Rodriguez-Clarez (2011) will be presented. The thesis concludes by discussing the contribution of the Melitz model to explain occurring trading patterns and its limitations.